Super charge on trial in High Court

The superannuation guarantee charge (SGC) is not a tax and the federal government has no right to impose it on businesses, the High Court has been told.

Roy Morgan Research, a market research company, well known for its election polling, has launched a case in the High Court that claims it shouldn’t pay the guarantee, the cornerstone of Australia’s $1.3 billion investment industry.

“Our point is that the superannuation guarantee charge is imposed for private purposes and that it is not imposed for public purposes," Jennifer Batrouney SC, Roy Morgan’s barrister, told the court, according to a transcript published this week.

Without a public purpose, it is not a tax, which means that it is an acquisition of property from businesses without paying just terms, Ms Batrouney said.

The superannuation guarantee charge is levied on employers that fail to pay the minimum 9 per cent level of superannuation for employees.

The Australian Taxation Office assesses offending employers not only on the super amount due, but added interest and administration costs.

In late 2007 the Tax Office imposed a super guarantee charge on Roy Morgan, relating to contractors who conducted face-to-face and phone interviews between 2000 and 2006. The ATO deemed the contractors were employees and entitled to super.

Up to this final appeal, the ATO and the federal government have won their argument that the charge is constitutional, as there was a public purpose in the incentive to pay the super and relieve the public purse of paying pensions.

Related Quotes

Company Profile

“This court would have to be blind not to see that the reason the government has imposed this legislation is . . . to increase coverage and to provide for retirement income policy, et cetera, but . . . that is not relevant," Ms Batrouney said.

“One cannot rely on the government’s income policy to validate this legislation, to clothe it with a public purpose that it does not otherwise have."

Stephen Gageler SC, a barrister acting for the Attorney-General, said it was a “misconception [to say] that a payment out of consolidated revenue for a private benefit cannot also be a payment for a public purpose".

A Minter Ellison partner who is not involved in the case, Maged Girgis, said if Roy Morgan won it “would be an absolute nightmare".

“What it would mean is large amounts of money being paid back to employers from super funds," Mr Girgis said, with the exception of those with an award provision that secured a super contribution.

“You’re looking at basically undermining the Australian government’s entire retirement income policy over the last 19 years."

He said it was more likely that the government would win.

Roy Morgan chief executive
Michele Levine
said that she did not attend the hearing, but was told it was a “vigorous" one. The transcript runs for 67 pages.

Ms Levine said the case affected the “whole range of companies that deal with contractors".

The issuance of the assessment by the Tax Office in 2007 for the previous years was like “rewriting history", she said.

It added significant cost to already agreed contracts.

Roy Morgan has thousands of people who are deemed employees that have worked just once.

Ms Levine said that the government needed to clarify the difference between an employee and a contractor. The greyness of the area was causing uncertainty and cost, pushing companies to India, China and the Phillipines, she said.

“We’re one of the few companies that actually employ interviewers from Australia," she said.

University of Sydney professor of constitutional law Helen Irving said that, to succeed, Roy Morgan would have to persuade the High Court to reconsider previous judgments in which a public purpose was not held to be an essential feature of a tax.

“This will be difficult because no taxation law has previously been invalidated purely on this ground," she said.